TAX PENALTIES & INTEREST
TAX PENALTIES & INTEREST
Types of IRS Penalty Charges
Late Filing Penalties
According to IRS regulations, penalties will be assessed and added to your bill if you owe tax and do not file on time. Any penalties are in addition to the taxes owed as well as the interest on those taxes. The total late–filing penalty is usually 5% of the tax owed for each month, or part of a month, that your return is late up to five months (25%). If your return is over 60 days late, the minimum penalty for late filing is the smaller of $100 or 100 percent of the tax owed.
Late Payment Penalties
The late payment penalty on any taxes filed on time but not fully paid are one–half of one percent (0.5%) of the actual tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full. There is no maximum limit to the failure-to-pay penalty.
What are the Consequences of Not Filing Back Taxes?
The consequences for failing to pay taxes and failing to file taxes are vastly different, with failure to file incurring much higher rates of penalty. If taxes remain unpaid, a truant taxpayer may be charged high penalty interest rates, see their assets seized, and in rare cases, face jail time.
What if I Missed the Tax Deadline?
It’s essential that you file as soon as possible to avoid incurring higher penalties and being forced to pay even more than you owe due to accrued interest.
Will the Government Levy my Assets?
It is a possibility that the IRS will levy the assets of a taxpayer who has repeatedly failed to make payments, and the following consequences may be enforced.
Wage Garnishment: If the government garnishes your wages, your employer will be legally required to withhold a certain percentage of your pay to cover unpaid taxes.
Tax Lien: If a tax lien is enforced, the government has claimed your property as an assurance of rights to your property over other creditors waiting for debt payment.
Bank Levy: Tax officials will demand that you bank put a hold on the fund in your account, and seize said funds to cover your unpaid tax liability.
Property Seizure: All of your property assets are up for grabs if you have repeatedly avoided repaying your taxes. Authorities may seize items such as your home, car, boat or any other asset that might be sold to cover your debt.
It is essential that you speak with a tax professional as quickly as possible to come up with a payment plan or IRS agreement that will work for your individual needs to avoid being served with one of the aforementioned penalties.
What if I Can’t Pay what I Owe in Full?
The IRS offers various payment plans that can help taxpayers who may not be reasonably able to pay the full amount owed, including installment payment agreements, offer in compromise resolution, and other payment plans. A tax professional can help you determine which is best for your situation.
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